Earlier this week, Massachusetts governor Deval Patrick led a trade mission of commonwealth business executives and government leaders to Panama. Despite its population of only 3.5 million, Panama plays a significant role as a hemispheric hub for the Americas. With an economy comprised primarily of services, versus manufacturing, Panama is rapidly expanding its position as the logistics and distribution center for Latin America.

Panama's growth rate is high at ten percent, outpacing other countries in the region. The economy is diverse, unemployment is low, and innovation is being embraced by business and government leaders.

Panama's greatest asset is the Panama Canal, currently being expanded to accommodate longer, heavier and larger vessels that carry cargo between the Atlantic and Pacific Oceans. Operating 24 hours per day, with 40 ships making passage daily, the Canal contributes $2 Billion annually to the Panamanian economy.

For Massachusetts companies interested in doing business in Panama, opportunities abound. Many of the strengths of the Massachusetts economy match well with Panama's current needs, and Panamanian businesses and government leaders are eager to partner with firms from our commonwealth. Infrastructure is a key industry in Panama, where projects are underway or being launched to expand the canal, the subway system, and the main airport. Massachusetts companies are encouraged to bid on these projects. Security—of cargo, people, planes and ships—is another sector of interest. Energy conservation and retrofitting of buildings and homes to increase efficiency is a priority for Panama. And clean energy—power, water, and more—is needed in both urban and rural areas in Panama.

Ease of doing business is a hallmark of Panama. Massachusetts companies will benefit from a US dollar-based economy, prevalent English language, a safe environment, direct non-stop air service via Copa Airlines between Boston and Panama City, and a US-Panama Free Trade Agreement which means low or no tariffs. Two former US air bases near the canal have been converted into office parks: the City of Knowledge focuses on non-profit and scientific/research companies, while Howard Air Base has attracted US companies such as Dell, HP, Caterpillar and more. Several free trade zones are also available.

Like Massachusetts, Panama needs more engineers and mid-level workers. The K-12 public education system is not working as well as it should to produce the next generation of skilled workers. Some of the discussions during this week's trade mission centered on sharing best practices in education at all levels.

Panamanians are bullish about the future. Early stage plans are already in place for the NEXT expansion of the Canal, estimated to be needed in 20-25 years. In the meantime, businesses and ports around the world, including our own Massport, are eagerly anticipating completion of the current canal expansion in late 2015.

Massachusetts firms interested in identifying business opportunities in Panama should contact AIM's Kristen Rupert, who participated in the recent trade mission, at krupert@aimnet.org.

Boston and Washington provided a study in contrasts this week on the ability of government to manage its expenses during times of fiscal distress.

As federal budget negotiations devolved into a desperate game of chicken over raising the nation’s debt ceiling, Governor Deval Patrick quietly signed a Fiscal Year 2012 state budget designed to close a $1.9 billion budget gap without new taxes.

Sure the $30.6 billion Beacon Hill spending blueprint was finalized 12 days late. Yes, the deliberations included plenty of contentious debate over collective bargaining. And the judicial branch ended the week in full revolt over budget reductions by threatening to close 11 courthouses and asking the governor to cease appointing new candidates to the bench.

But the governor and the Legislature ended up achieving remarkable consensus in the fourth consecutive year of fiscal crisis following the recession of 2008. That consensus produced a budget with much to like for employers still struggling to accelerate hiring in an uncertain economic recovery:

The decision to avoid tax increases indicates that lawmakers believe that the only way to solve the commonwealth’s long-term budgetary issues is through economic expansion and job growth.

The budget gives cities and towns the ability to control soaring health insurance costs by changing the design of employee health coverage after an expedited 30-day bargaining window. The provision matters to employers who have been concerned that spiraling health costs threaten the ability of cities and towns to provide the educational, safety and public works services that businesses need.

The employer-funded Massachusetts Workforce Training Program will be placed into a trust that will remove the program from the uncertainties of annual budget deliberations. The flagship program through which Massachusetts improves the skills of workers has provided $193.2 million in grants since its inception to some 2,500 Massachusetts employers to train 277,351 people.

The budget includes three tax reforms designed to strengthen the state’s business climate and enhance fairness and predictability for taxpayers: speeding tax audits, establishing equal rules for taxpayers and the Department of Revenue and providing early notification of changes in tax policy.

There were disappointments in the budget process as well:

Governor Patrick vetoed two provisions essential to the stability of employer-sponsored health plans: One would have required the Massachusetts Division of Insurance (DOI) to notify health plans 60 days in advance if they plan to reject insurers’ proposed health insurance rates. The other would add additional actuarial criteria the DOI has to take into consideration before rejecting insurers’ premium rates. AIM and other business groups have asked the Legislature to override these vetoes.

The final budget omits a proposal originally passed by the House of Representatives to narrow the onerous treble damages provision for violations of wage and hour laws.

Also omitted was a House-passed measure to repeal the pharmaceutical gift ban that threatens job growth in one of the economy’s most important sectors.

AIM will continue work with lawmakers outside of the budget process to address the treble damages law and pharmaceutical gift ban, both of which raise red flags for companies evaluating whether or not to do business in Massachusetts.

“On balance, the budget creates fiscal stability and takes a courageous step toward empowering cities and towns to save up to $100 million on health insurance costs,” said John Regan, Executive Vice President of Government Affairs at AIM.

“And all that without people walking out of negotiations, without brinksmanship, without talk of eating our peas and without the level of acrimony that has consumed Washington.”

Next week, members of the Massachusetts House of Representatives will debate and vote on the Fiscal Year 2012 budget which includes language limiting the current punitive treble-damages law to “willful” violations of the wage and hour statute only. This change has been sought by AIM since the original law passed in 2008.

AIM urges you to contact House members asking them to support this language and to oppose any amendment preventing the fixing of the treble damages law.

The current law penalizes companies that have done nothing outrageous, have not acted with an evil motive, and have not acted with reckless indifference to employees' rights. The same would be true in the case of a good-faith dispute over whether an employer owes commissions.

This House proposal mirrors Governor Deval Patrick’s language to fix a 2008 law that imposed punitive treble damages even in cases where an inexperienced employee of a Massachusetts business makes a clerical or other honest error.

Massachusetts is rated poorly by the US Chamber of Commerce because of this onerous law that mandates treble damages for any Wage Act violation. The House Ways and Means Committee proposal would bring fairness and equity to a law which is now unduly punitive.

AIM thanks Speaker Robert DeLeo and House Ways and Means Chairman Brian Dempsey for a fiscally sound House budget which benefits the Massachusetts Economy. AIM also recognizes the work of Ways and Means Committee Vice Chair Steven Kulik and Assistant Vice Chair Martha Walz on the proposed House budget and for addressing the treble damages issue.

Click here to contact your elected officials and urge them to fix the treble damage law.

The controversy surrounding Evergreen Solar’s decision to close its Devens manufacturing plant after receiving millions of dollars in state incentives underscores two bedrock beliefs of Associated Industries of Massachusetts and its member employers:

Real economic growth and prosperity is possible only when government creates a uniformly favorable environment for business development across all industries.

Business costs matter just as much in the new economy as they do in the old.

AIM has argued since its founding in 1915 that long-term economic stability requires state government to create a predictable and competitive business climate for everyone from the corner grocery store to the software startup to the paper converter. Sound, consistent economic policy - reasonable costs, efficient regulation, world-class schools and predictable fiscal outcomes - serves as a far better fuel for creating jobs than picking winners and losers from individual industries.

Emerging industries such as solar and wind power play an important role in economic growth, but so do existing sectors that employ – and will continue to employ - the vast majority of Massachusetts residents. Innovation and technology are hallmarks of successful business in every corner of the Massachusetts economy. A consistently favorable business climate is especially important in areas like the Berkshires, the Pioneer and Merrimack Valleys and Central and Southeastern Massachusetts, where the economy often depends on traditional economic drivers.

Meanwhile, high-technology, biotechnology and clean-technology jobs respond to the same economic influences that determine whether metal machining, accounting or retail jobs will provide economic opportunity to citizens of Massachusetts, citizens of Michigan or citizens of China.

Policymakers in Boston and Washington love to paint new-economy jobs as an economic panacea, immune to high taxes, staggering electricity costs and bureaucratic regulation. It is a political construct that allows policymakers to support the development of innovative “industries of the future” while raising costs for the industries of the present. Making matters worse is the fact that many industries of the future would not even exist without government-mandated taxpayer subsidies from the rest of the business community.

But the new-economy narrative has withered in the glare of reality as prominent technology companies that were poster children for innovation-based economic development in Massachusetts have announced major expansion projects elsewhere. The Boston Globe reported that several companies found it “hard to say no” to predictable cost structures in China or hundreds of millions of dollars in state and federal grants and tax credits to manufacture advanced technology in the South or Midwest.

At the core of the Evergreen issue is the now familiar story of 800 Massachusetts manufacturing workers and their families separated from jobs that seemed so promising just a few years ago. We look forward to working with the Patrick administration and the Legislature to control the cost of doing business for all employers and to create the kind of business environment that encourages growth and provides opportunities to all residents of the commonwealth.

2010 shifted the always unpredictable alchemy of business and politics in the Bay State.

A year that began with a political earthquake when Republican Scott Brown won the Senate seat formerly occupied by Edward M. Kennedy ended amid hopeful signs that the halting economic recovery was here to stay. Massachusetts employers spent 2010 trying to put the economic crisis behind them while dealing with developing crises surrounding the cost of health care and electricity.

What were the top 10 stories that affected Massachusetts employers during 2010?

Massachusetts economy recovers fitfully, but faster than the nation as a whole.

The unique mix of knowledge-based, high-value companies that drive the Massachusetts economy helped the commonwealth end 2010 with an unemployment rate of 8.1 percent, well under the national rate of 9.3 percent. The AIM Business Confidence Index rose throughout the spring, and then returned to positive territory late in the year after turning bearish in the third quarter.

AIM challenges expensive National Grid/Cape Wind power agreement.

Associated Industries of Massachusetts (AIM) asked the Massachusetts Supreme Judicial Court in December to set aside the commonwealth’s approval of a power-purchase agreement between National Grid and Cape Wind that will increase electric bills for thousands of Massachusetts employers. AIM said the agreement sets a dangerous precedent for allowing utilities to negotiate expensive power agreements outside of the competitive bidding process and to allocate the costs of those contracts unfairly to commercial and industrial customers.

The cost of providing health insurance to workers reached the tipping point for employers as rates rose up to 40 percent and virtually everyone agreed that the Massachusetts health care market is unsustainable without fundamental changes to the way companies and consumers purchase medical services. Governor Patrick rejected scores of proposed rate increases by insurance plans, then signed a cost-containment law requiring insurers to offer low-cost, limited or tiered network plans, and setting the stage for broad changes in the way insurance companies pay for medical care.

Political scramble - Scott Brown elected to the Senate and Governor Patrick re-elected despite national Republican landslide.

Republican Scott Brown of Wrentham shook the political world in January when he won a special election to fill the Senate seat held for decades by the Kennedy family. The election made Brown a superstar in Washington and unleashed a tidal wave that returned Republican control to the House of Representatives in the November elections. Ironically, one of the only states the tidal wave missed was Massachusetts, where Governor Patrick won re-election and every Democratic representative was returned to office.

Corporate acquisitions are back.

Two years after the global financial crisis, New England companies with strong balance sheets pulled out their wallets and began to make strategic acquisitions. Connecticut-based Northeast Utilities agreed in October to buy NStar for $4.17 billion in a deal that will create the largest New England utility company. German drug giant Merck KGaA bought life sciences company Millipore of Billerica for $6 billion in March. Massachusetts companies were also buyers: Thermo Fisher Scientific announced in December that it would purchase Dionex Corporation of California for $2.1 billion.

President Barack Obama in March signed landmark national health reform legislation that bore a striking resemblance to the Massachusetts health care reform law of 2006. The federal law requires individuals to carry health insurance, changes underwriting rules and imposes a fee if an employer does not offer coverage. The fact that Massachusetts was the only state in the nation with its own health reform initiative was a mixed blessing for employers – the concepts were familiar, but there are significant differences between the state and federal laws that must be reconciled. In December, a U.S. District Court judge in Virginia ruled that the individual mandate is unconstitutional.

Defense industry emerges as the untold success story of the Massachusetts economy.

A report by AIM and the University of Massachusetts in December showed that as the overall economy has struggled in the face of two recessions and fundamental industry shifts, Massachusetts defense contractors quietly tripled the value of their contracts to $15.6 billion. They doubled their employment rolls to 115,563 people and increased their overall economic output by 146.2 percent. The report also found that innovation-rich Massachusetts defense contractors are well positioned to offset overall defense cutbacks by addressing technology needs at the Departments of Defense and Homeland Security.

Furious lobbying by AIM and business interests around the country prevented passage in Congress of the so-called Employee Free Choice Act, which would have deprived workers of the right to a private ballot in union elections. Congress also declined to pass another labor priority, the Paycheck Fairness Act. But President Obama’s appointment of union lawyers Craig Becker and Mark Pearce to the National Labor Relations Board shifted the labor relations playing field steeply away from employers.

Massachusetts approves wide-ranging economic development measure.

The Legislature approved and the governor signed an economic development bill that limits the scope of combined tax reporting, creates a 3 percent capital gains tax rate for individual investors in start-up companies, and provides most industries with the ability to extend a net operating-loss (NOL) carryforward from five to 20 years. The bill also places an automatic sunset provision on state regulations and requires proposed new regulations to include a business impact statement. The state will undertake a study of the factors driving the high price of electricity for Massachusetts employers.

State lifts charter school cap, adopts national standards and wins Race to the Top dollars for education reform.

A controversial decision to endorse national education standards paid off for Massachusetts in August when the commonwealth won some $250 million in federal education money through the Race to the Top (RTTT) competitive grant program for school improvement. The money will support reform efforts in four areas: standards and assessments; statewide data systems; effective educators; and turning around low-performing schools. These priorities were supported by employers, who recognize the importance of educated citizens to fuel economic growth.

What is your opinion about the most important business developments of 2010? We welcome your comments.

AIM and Denterlein Worldwide yesterday kicked off a series of forums with the candidates for governor as incumbent Deval M. Patrick said that his administration has made the difficult and sometimes unpopular decisions required to ensure the long-term stability of the Massachusetts economy.

The forum series is intended to give candidates the opportunity to discuss their approaches to business and economic issues with a small audience of executives from throughout the commonwealth. Governor Patrick yesterday covered topics ranging from health care reform to educational achievement to tax policy in an interview format with retired WBZ political reporter and Denterlein Worldwide executive John Henning.

AIM will post segments of candidate remarks at the forums to give employers an opportunity to hear directly how each intends to steer Massachusetts out of the deepest recession in 80 years. Please post your questions for Governor Patrick, or any of the challengers, and AIM will attempt to secure a response.

State Treasurer and Independent candidate for governor Timothy Cahill will visit the forum in April. Republican challenger Charles Baker has also been invited.

Governor Deval Patrick's bill to address unemployment insurance funding has positive elements, including a recently approved rate freeze and a provision to wall off the Work Force Training Fund from annual budget debates.

But AIM is seriously disappointed in the lack of substantive reform contained in the governor's proposal. We testified on the bill today at a Legislative hearing.

In the cover letter that accompanied the filing of this bill, the governor states that this legislation reduces business costs by:

freezing unemployment insurance rates for all Massachusetts businesses; and

In fact, the bill proposes minor reforms while expanding benefits. The governor also proposes to increase the effective UI tax rate by nearly 50 percent through a taxable wage base jump from the current level of $14,000 to $21,900 per employee with an indexing provision going forward.

While we understand that the administration has expressed an intention to reduce UI rate tables to make the expanded wage base on which the rates apply "revenue neutral", the bill as filed does not include those provisions. We look forward to working with the committee and the administration to resolve this omission. Relative to indexing the wage base, AIM is opposed.

On the issue of significant UI reform, AIM has testified repeatedly and consistently for the reform proposals listed below:

Reforming the statutory rates for UI by lowering rates for those companies who do not lay-off employees and providing much needed relief for those companies;

Increasing the number of weeks of work for eligibility to collect UI benefits from 15 weeks to 20, as well as requiring earnings for eligibility over two quarters, bringing Massachusetts into line with the majority of other states and saving the UI system an estimated $30 million;

Changing the statutory trigger mechanism, reducing the maximum duration of benefit weeks to 26 when the state's economy is performing well, from 5.1 percent unemployment in each of the 10 local labor market areas in the state to a straight 5.1 percent unemployment rate statewide. (Reducing the maximum duration of benefits from 30 to 26 weeks saves the UI trust fund between $50 and $90 million per year and would bring Massachusetts into sync with all other states);

Requiring the UI contribution rate of new employers to be set at the so-called zero positive rate, more accurately reflecting their actual contribution status;

Computation of Taxes, Massachusetts is one of only 3 states, which determine UI taxes based upon only the prior 12 months of payroll. Forty-seven states use payroll paid for the past 3 to 5 years. The current Massachusetts system is simply poor tax policy since it creates an incentive to decrease, not to increase payroll. The Massachusetts UI tax system represents economic stimulus in reverse.

Governor Deval Patrick today signed the Unemployment Insurance rate freeze bill, which will limit the average UI tax increase faced by Massachusetts employers to $111 per employee in 2010. The measure averts an automatic increase of $252 per employee that would have taken effect had the Legislature and administration not acted.

The freeze reduces the overall UI increase for employers by $390 million.

I thank Governor Patrick and the Legislature for freezing scheduled unemployment insurance rates for 2010. This announcement will afford employers significant savings at a time when many businesses are continuing to struggle through a tough economy.

This is the type of action AIM advocates for and will help lead to a strong business climate in Massachusetts. We look forward to a discussion on meaningful reform of the system.

The bill freezes overall UI rates at Schedule E retroactive to January 1. UI rates would otherwise have escalated automatically from Schedule E to Schedule G in the wake of dwindling assets in the fund used to pay jobless benefits.

The term "freeze" is misleading because many employers will still end up paying more UI taxes than last year. The reason is that actual Unemployment Insurance payments are based upon experience ratings, and those ratings have generally deteriorated during the past 18 months as companies have reduced their work forces in the face of the recession.

The governor's decision to sign the bill came as little surprise since he made a UI rate freeze part of a broad economic development plan announced last week. The Massachusetts Legislature gave final approval to the bill on Tuesday and the governor signed it before departing for the National Governor's Association meeting.

Associated Industries of Massachusetts knows better than anyone the frustration felt by Massachusetts employers with inexorably rising health insurance premiums that restrict job growth and economic opportunity. We therefore commend Governor Deval Patrick for his willingness to address the issue - the governor today announced that the state would essentially limit health insurance rate increases for small business to the 3.2 percent rate of medical inflation.

Governor Patrick is also seeking the limit rate increases for hospitals, physicians, medical imaging centers and other health-care providers. The governor has the authority to control insurance premium rates administratively, but needs legislative approval to review rates for providers.

There are positive and innovative elements to the governor's proposal, including a suspension of new mandated health insurance benefit requirements until July 12, 2012. Another provision would require carriers in the small group market to offer at least one reduced network plan with premiums that are at least 10 percent lower than the premiums for the full network product.

But good intentions will not solve the health insurance cost problem in the long term and neither will an arbitrary cap on premium increases. AIM's longstanding involvement in trying to break the choke hold of rising health costs on employers has taught us that any lasting resolution will involve a mix of structural payment reform and a comprehensive long-term strategy for improving the health care outcomes through an efficient and valuable health care delivery system.

While AIM does not support rate setting generally, we do agree with the governor's goal of creating a sense of urgency and making sure that all stakeholders earnestly work to achieve a more efficient, rational health care delivery system. For too long the discussion has focused on all the reasons to not change our health care system and this inertia has cost employers greatly. To the extent that the administration is putting pressure on insurers and providers to be part of the solution, we support his efforts.